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In Quest of the Bank Lending Channel: Evidence for Switzerland using Individual Bank Data

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  • Robert Bichsel
  • Josef Perrez
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    Abstract

    We study the role of bank capital and liquidity in the transmission of monetary policy in Switzerland. Using a large set of data, we test the assumptions that the effect of a change in the monetary policy stance on a bank's lending activity depends (i) on its capital (the bank capital channel) and (ii) on its liquidity base (the "traditional" bank lending channel). Our findings are consistent with the first hypothesis: lending by banks with a relatively weak capital base reacts more to a change in the monetary policy stance than lending by better capitalised banks. Liquidity, on the other hand, does not appear to play a role in this context. This result constitutes evidence for the existence of a bank lending channel in Switzerland.

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    Bibliographic Info

    Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

    Volume (Year): 141 (2005)
    Issue (Month): II (June)
    Pages: 165-190

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    Handle: RePEc:ses:arsjes:2005-ii-1

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    Postal: c/o SNB/BNS, Börsenstrasse 15, PO Box 2800, CH-8022 Zürich
    Phone: +41 (0)44 631 32 34
    Fax: +41 (0)44 631 39 01
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    Web page: http://www.sjes.ch
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    Related research

    Keywords: monetary policy; transmission mechanisms; bank lending channel; bank capital channel; Switzerland;

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    References

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    1. Anil K Kashyap & Jeremy C. Stein & David W. Wilcox, 1992. "Monetary Policy and Credit Conditions: Evidence From the Composition of External Finance," NBER Working Papers 4015, National Bureau of Economic Research, Inc.
    2. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
    3. Angeloni, Ignazio & Ehrmann, Michael, 2003. "Monetary policy transmission in the euro area: any changes after EMU?," Working Paper Series 0240, European Central Bank.
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    7. Simon Gilchrist & Charles Himmelberg, 1998. "Investment, Fundamentals and Finance," NBER Working Papers 6652, National Bureau of Economic Research, Inc.
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    13. Kishan, Ruby P & Opiela, Timothy P, 2000. "Bank Size, Bank Capital, and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 121-41, February.
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    16. Murillo Campello, 2002. "Internal Capital Markets in Financial Conglomerates: Evidence from Small Bank Responses to Monetary Policy," Journal of Finance, American Finance Association, vol. 57(6), pages 2773-2805, December.
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    18. Timothy S. Fuerst & Charles T. Carlstrom, 1998. "Agency costs and business cycles," Economic Theory, Springer, vol. 12(3), pages 583-597.
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    Cited by:
    1. Banu Simmons-Süer, 2010. "Werden Wirtschaftskrisen durch das Verhalten der Banken verschärft?," KOF Analysen, KOF Swiss Economic Institute, ETH Zurich, vol. 4(2), pages 41-56, June.
    2. Wu, Ji & Luca, Alina C. & Jeon, Bang Nam, 2011. "Foreign bank penetration and the lending channel in emerging economies: Evidence from bank-level panel data," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1128-1156, October.

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